Ignace CombesDear reader,

For the third edition, we have again been able to assemble interesting articles and publications from market executives and market practitioners as well as research insights from academics. We give thoughtful views on what is happening in the financial world and discuss the need for organisations to reposition themselves in this changing world. But we also look at the opportunities and challenges the financial industry is facing to address the fall out of the crisis, the avalanche of new regulations and discuss how they can position themselves for sustained value.

Dialogue is the financial industry-wide window of the Vlerick Centre for Financial Services to stimulate debate and reflection across all stakeholders. It is part of a comprehensive approach to serve the financial industry through publication of research, education, events and round tables. We value a combined approach of company specific partnerships and sector-specific studies. 

The main focus of this third edition is on the implementation progress of new regulation and on the impact on the business (“Silent Revolution of Europe”). New regulation always brings along constraints to which to adapt. The core role of banks is to collect savings and to channel them into the economy. Vlerick Business School has started to do research on the possible extent and the motives of the mismatch between credit supply and demand, and on the possible remedies, given that the lessons from the crisis and the new regulations do have an impact on the banks’ intermediation role. The research paper “Firms’ Financing Constraints: Do Perceptions Match the Actual Situation” already gives an interesting angle on the subject by making the link between the results of a survey on perceived access to credit (for small and medium enterprises) and the reported financial and balance sheet information.

However, new regulation also brings new opportunities for early adopters. A nice illustration of this are the changes from the new Basel regulations (and possibly Solvency II) as you can read in the interview with executives from KBC and Allen & Overy (“New Emerging Business Models for Long-Term Funding of the Economy”). Long term infrastructure investments and projects will offer opportunities for insurance companies and pension funds. This leads to new business models of collaboration between the traditional “bank” players and the new “institutional” investors, each leveraging their strengths and natural business model. This could lead to an increased use of capital markets to facilitate the link and the intermediation between credit needs and investors.

Given all the changes taking place in the financial industry such as new regulation, changing customer behaviour and new technologies, it is important to understand how executives perceive these changes i.e. as challenges or opportunities. In the context of a Prime Foundation partnership, a series of interviews have been conducted with banking executives to understand their view of the future of the industry. As you can see from the enclosed report (“The future of the Belgian banking industry: the executives’ point of view”), their responses are direct and very clear, highlighting the many challenges they face to restore sustainable value and profitability. However, one of the encouraging outcomes is that the interviewed executives recognise the need for innovation. Their comments focus on addressing the changing needs of their customers and the use of technology for better client profiling, qualitative interaction and customisation. Another article (“Post-digital Innovation in Financial Services”) digs into the what, why and how of digital innovation and makes the case that organisations investing in the new technologies (big data, social, mobile, cloud and cyber) will enjoy a financial premium. However to fully realise the potential, it will be key to focus on the prize and not on the hurdles. This reminds me of a conference where the qualities of successful entrepreneurs were discussed. A successful entrepreneur is one who focuses on the potential of his idea, one who convinces himself of “why not” and not “yes, but”. One who is stubborn and doesn’t give up (easily) and one who will do whatever it takes to overcome the hurdles. Recognising that financial institutions are generally not known to be the best in class in terms of technology innovation, they will have to equip themselves with the necessary capabilities and knowledge to succeed. New ideas and innovation will need the necessary space to develop and grow and long-term commitment is needed to support this goal. It is clear that an industry facing challenges and changes could be exposed to new entrants. While the barrier to entry into the financial industry might be high, this is a potential risk. Banks possess a wealth of knowledge and capabilities and if reinforced with new technology, they should be well positioned to deal with this risk. (“Technology in Banking – Reinforcing corporate DNA with Technology in Search for the Holy Grail”). However, this implies that financial institutions become much better at dealing with their legacy system, combining them with new technology and focus on the client without being trapped in mega projects with no clear link to a differentiation-based, value-driven positioning in the market.

Finally, the study “Financial Happiness Barometer” states that higher income leads to more financial happiness but that the average Belgian is not making a great deal of effort to achieve this financial happiness. I trust that the collaboration between the financial industry and the Vlerick Business School through the Vlerick Centre for Financial Services helps to make the industry achieve their value-driven happiness. 

Feedback and views even diverging views to the ones expressed in this third edition of Dialogue are as always very welcome through the different Facebook, Twitter, ..... channels.

Don’t hesitate as well to forward the link ..... to colleagues or others you know could be interested in the attached articles.

Have an interesting reading,

Ignace R. Combes
Chairman of the Vlerick Centre for Financial Services


& Rankings

Equis Association of MBAs AACSB Financial Times